The continued development
of innovative new products with added-value features and premium price positioning
is the key manufacturer strategy for driving value growth.

The market has been characterised
by a trend towards high quality products akin to home-made soups, featuring
increasingly elaborate recipes.

The market remains seasonal
in nature, with soup generally perceived as a warming winter food, although
manufacturers are attempting to lessen this bias with cold products targeted
at the summer months.

Manufacturers have attempted
to reinvigorate the packaging concept of soups in recent years, by introducing
convenient features such as ring-pull cans and proprietary glass jars, whilst
chilled soup manufacturers have launched durable, oven-resistant plastic bowls.

Carton packaging is showing
dynamic growth in several key markets, but has yet to become as well established
as it is in France.

Historically, canned soup
leads in a number of key markets, in particular the UK and the US, where canned
manufacturers HJ Heinz and Campbell Soup Co respectively predominate.

Dried soup has a long history
in Spain and Japan, where soup products offering longer shelf lives are favoured.

Chilled soups showed some
of the most dynamic growth rates over the review period, benefiting from increasing
consumer health consciousness, despite their short use-by periods.

The soup market is generally
characterised by polarisation, with premium-positioned value-added products
at one end of the market and private label economy products at the other.

The market is characterised
by a strong presence of umbrella brands, such as Knorr (Bestfoods) and Campbell's
(Campbell Soup Co), supported by heavy adspend.

Retail distribution of soup
is dominated by multiple grocers, illustrating the popularity of one-stop shopping
and growing private label penetration.

Soup by Value - 1999
Performance

The US market for soup
amounted to sales of US$3,648 million in 1999, reflecting the large size of
the country's population and the well-established, commodity status of many
products in the soup market, particularly canned varieties. Value sales in the
US in 1999 were almost three times those of the second-placed Japanese market.
The third-placed market, the UK, was valued at US$640 million in 1999, reflecting
a relatively high level of per capita expenditure on soup and the traditional
significance of soup consumption in this country, particularly in the cold winter
months.

Value performance across
six of the seven key markets in 1999 was positive, if unspectacular, in current
value terms, but in real terms growth rates fell away and only Japan and the
UK recorded growth in excess of 3.4%, with Germany and the US registering real
value decline.

The French soup market
has in recent years been characterised by a shift towards high-quality products
akin to home-made soups and more elaborate recipes. Whilst canned sales have
been boosted by the success of the carton format, manufacturers of dried soups
have responded vigorously to the development of its carton counterpart. Manufacturers'
efforts to revamp their ranges and to offer more elaborate recipes paid off,
and translated into a 2.4% real value increase in 1999.

Increasing sales of private
label products in Germany impinged on market value during the review period,
with cheaper unbranded goods becoming more popular with consumers. In 1999 the
market showed some signs of reversing its downward trend, falling by just 1.3%.
This was primarily a result of above-average growth of liquid soups. Canned
soups benefited from a sudden upturn in advertising expenditure, accompanied
by the successful launch and relaunch of new and existing brands by Heinz. However,
increasing sales of low-price private label products served to hinder real growth.

After years characterised
by very low dynamism, the canned soup sector in Italy saw several attempts to
revitalise it in 1998 and 1999. These included a relaunch of the carton format
by Bestfoods, a packaging type which had been dropped by Parmalat some years
previously. Dried has always been the larger sector and showed greater dynamism
during the review period. Stagnating consumption generally, and falling prices
undermined value sales in 1999, with real value growth amounting to a marginal
0.6%.

Steady real value growth
in Japan in 1998 and 1999 was attributable to rising demand for dried instant
soup. Acting as an accompaniment, dried instant soups have benefited greatly
from the rise in sales of bento ready meals. Greater sales of canned soups through
convenience stores and vending machines also boosted value growth, as products
were exposed to a wider consumer base.

In 1999, sales of soup
in Spain advanced by 2.9% in real value terms. Demand for more convenient, easy-to-prepare
food products benefited the soup market, which was further stimulated by the
introduction of traditional recipes which appealed to the rising number of women
entering the work force, and therefore having less time to dedicate to home-cooking.

Considerable promotional
activity and product innovations across all types of soups underpinned real
value growth of 3.4% in the UK in 1999. An increase in such activity in the
latter half of the review period was a significant contributory factor to the
higher annual growth rates seen in 1998 and 1999. This accelerating growth can
also be explained by variations in climate. The warm winters of 1996 and 1997
depressed soup sales, whereas the poor summers of 1998 and 1999 are considered
by trade sources to have had the opposite effect.

Value sales of soup in
the US increased by 0.4% in 1999, to stand at US$3,648 million. However, this
translated into a decline in real value terms, as consumers showed a greater
preference for convenient "meal solutions" and increased frequency of eating
out. Tight price competition and a growing threat from private labels further
constrained value growth in the latter part of the review period.

Value Sales of Soup
in US$ and Euros by Country 1999

Million, 1999 exchange
rates

US$

euro

France

362

333

Germany

440

404

Italy

56

52

Japan

1,287

1,207

Spain

103

94

UK

640

600

US

3,648

3,422

Source: Euromonitor Market
Direction

Soup by Sector - Value

Dried constituted the largest
sector of the soup market in value terms in four of the seven key markets in
1999, with shares ranging from 70% in Germany to 89% in Spain. The canned sector
was the largest in France, the UK and the US, with value shares of 49%, 62%
and 80% respectively in 1999. The chilled sector is most prominent in the UK,
with 16% of total value sales, but as yet remains absent from the German, Italian
and Spanish soup markets.

Following the introduction
of the carton format and the emergence of glass jar and retort pouch packaging,
the canned sector has undergone considerable segmentation. The tin can continues
to account for the majority of sales in most key markets, but in France carton
packaging dominates the canned sector in both volume and value terms. French
consumers have become well-accustomed to this packaging format, as products
such as milk and fruit juices have been marketed using such packaging for many
years.

In the US, condensed soups
accounted for two thirds of the canned sector in value terms in 1999, whilst
the tin can accounts for a leading, but declining, share of the Italian and
UK markets. Revitalisation of the Italian canned soup sector has been spurred
by a carton-packaging initiative from Bestfoods, whilst a similar revolution
is taking place in the UK market, following the introduction of Campbell's Deliciously
Good carton soups. The canned soup sector in the UK has also witnessed the launch
of retort pouch packaging by Heinz, but has some way to go before it matches
the level of retort pouch sales in Japan. Improved production and processing
has underpinned the resurgence of canned sales in Germany, as soups with a richer
taste and higher nutritional value have found greater favour with consumers.
Value has been further boosted by increased demand for more exotic, sophisticated
premium-positioned canned soups.

The dried soup sector generally
segments between classic, extra and instant formats. Classic and extra soups
have traditionally dominated in France and Spain, but lost share over the review
period. Instant varieties however, dominate in Japan and the UK, as classic/packet
soups cannot offer the convenience and flexibility of instant products. In Italy,
minestre (a thick soup containing pasta or rice) dominates the dried sector
ahead of zuppe (a thin soup) and children's products. There is no real alternative
to dry minestre, whereas frozen minestrone provides considerable competition
for zuppe.

The chilled sector accounts
for a significant share of total soup sales in just three key markets, the UK
(16% of value sales), France (9.2%) and Japan (4.2%). In the US, only 1.2% of
total soup value sales are represented by chilled products. In spite of limited
distribution and short use-by periods, chilled soups have emerged as a successful
format in the wake of health scares (BSE and GM foods) and a consumer desire
for more healthy, less processed foods.

Value Sales of Soup
by Sector and by Country: % Analysis 1999

% volume

France

Germany

Italy

Japan

Spain

UK

US

Canned

48.9

29.6

27.7

17.3

11.0

61.8

79.6

Dried

41.9

70.4

72.3

78.6

89.0

22.3

19.2

Chilled

9.2

-

4.2

-

16.0

1.2

TOTAL

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Source: Euromonitor Market
Direction
Note: Figures may not sum due to rounding

Soup - Trends to Watch

The market will remain
heavily reliant on seasonal factors, with cold weather acting as a short-term
stimulus.

The development of a snacking
habit will benefit the soup market.

New product development
is likely to focus on exotic flavours and ethnic varieties, as well as nutrition-based
products enriched with vitamins.

Increased competitive pressure
on prices will be offset by trading up to premium, value-added soups.

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